HASC Tanker Hearing Analysis

The July 10, Air and Land Forces Subcommittee hearing on the source selection and path forward regarding the Air Force's KC-(X) program went on much longer than expected but yielded some new information and insight.

We have posted the GAO's testimony as well as the full hearing transcript on our documents site.

Also, you can listen to the hearing which is divided into two parts:
Part 1 Chairman's opening statement and the GAO testimony (23 min)
Part 2 GAO questions/Young testimony & questions (1 hr 48 min)

Observations on GAO testimony and questions:
1) GAO members found it unusual that none of the parties asked for a hearing. GAO instead called for one, but neither Sue Payton (the SSA) or LTG John Hudson (the chairman of the SSAC) testified at the protest hearing. Chairman Neil Abercrombie also found this very curious and said his subcommittee would follow up as to why these two important people were not selected by the Air Force to answer any questions.

2)Rep. Jeff Miller had the best grassy knoll theory of the day as he tried repeatedly tried to get the GAO reps to say union analysts had hand in the GAO decision. Mr. Miller attempted to call the impartiality of the GAO's decision into question by saying the GAO analysts were biased because their union, the International Federation of Professional and Technical Engineers was a vocal critic of the KC-30 contract.

Rep. Miller was assured the GAO's protest department is not unionized, and it is separate from the congressional reports department where the analysts work. Also, the GAO reps stated that only once was an analyst's advice even sought out during the protest decision. This single instance was only to clarify if a particular term in the report was used correctly.

Rep. Miller then followed up by accusing the GOA of creating an inflammatory decision report and argued that the KC-30 team's failure to address the Air Forces questions on depot-level maintenance should not have been labeled as a "refusal". The GAO reps said that the KC-30's own lawyers stated that the decision not to provide the information on the depot-level maintenance was "intentional".

3) The GAO reps stated, that while Air Force personnel did technically break procurement law, it was their opinion that this was not a case of intentional or malicious wrongdoing.

Nor did they see any indications of procurement personnel changing their minds on evaluations that might indicate outside influence.

4) The were several discussions on the Air Forces talking points, parroted by the KC-30 team, that only 8 out of over one hundred allegations were sustained. The GAO reps. did not know where the "over a hundred" allegations number came from and thought such a ratio was contrived or missed the point that the mistakes they did find were significant.

[Sec. Young later shed some light on this issue by saying the Air Force just counted up all the allegations in Boeing's eight protests. Mr. Young though did not offer much of an endorsement on the Air Force's math but did say that many of the allegations were overlapping.]

Observations on Young's Testimony and Questions:
1) Under Secretary of Defense of Acquisitions, Technology and Logistics, John Young was taken to task repeatedly for assuring Congress that the KC-(X) procurement selection was done correctly. HASC Chairman Ike Skelton (MO) said that despite these assurances, the train went off the track seven times and Mr. Young's oversight team failed to detect any of the issue the GAO sustained. Mr. Young said he had talked to his team, widely suspected to have been led by Shay Assad, about these shortcomings.

2) Rep. Nancy Boyda was asked that why only 25 year life cycle costs were used for evaluation when history shows that the tankers will probably be flown mush longer. Mr. Young replied that in fact since the requirements document stated that the life of the aircraft must be 40 years that the new RFP may call for determining 40 year life cycle costs.

3) Sec. Young stated that the current RFP would be amended as little as possible and that those amendments would primarily be to address the issues the GAO found. One of those changes could be to state that extra credit would be given to exceeding the KPP objective relating to aerial refueling.

Rep. Norm Dicks informed Sec. Young that Sec. of Defense Gates had already told Senator Levin that this extra credit provision would be in the new RFP. Sec. Young said he has not been told this Sec. Gates. (From this discussion, in is apparent that DoD has already made up its mind on this extra credit.)

4) Sec. Young said that the Sense of Congress was that cost needed to be made more important and that DoD would dutifully look into elevating this consideration. he also mentioned again that known cost such as those associated with SDD should be weighted more heavily than estimated life cycle costs.

5) Sec. Young laid out the new decision timeline as follows:

Late July	New RFP released
Mid August	Final RFP released
Early October	Proposal submission deadline
Late December	Contract Decision

Sec. Young stated that the process will be event driven and that his own team has told him that the new RFP may not be able to be completed until early August. Chairman Abercrombie told Sec. Young that he should fire anyone who is not dedicated to meeting timeline.

6) Sec. Young said that in addition to being the SSA he may also still be the Milestone B decision authority. The KC-X program currently has Milestone B approval, but this may be revoked due to the GAO findings and the expedited recompete.

HASC Tanker Hearing Today

Today’s public hearing is now finished.

First two GAO reps will speak:
Mr. Daniel Gordon Deputy General Counsel GAO
Mr. Michael Golden Managing Associate General Counsel Procurement Law Division GAO

Then one DoD rep will speak:
Mr. John Young, Under Secretary of Defense for Acquisition, Technology and Logistics

At our documents site we have posted the hearing read-ahead memo.

HASC Tanker Briefing Round Up

Yesterday the Air and Land Subcommittee of the HASC met with GAO officials and a last minute DoD procurement stand-in for the Sue Payton.

From the reports we received, it is clear that the majority of members came away from the brief more convinced then ever that the Air Force has continually misled Congress about the tanker selection process.

By their remarks, even those Members who support the KC-30 seemed to have concluded that GAO did a thorough job in rendering its decision and that the reasons for rebidding the contract are compelling and overwhelming.

When questioned if the GAO believed that the was malice directed against Boeing, the reply was that they did not believe so. But, they did mentioned that there was pattern of incompetence that clearly resulted in favoring the KC-30.

Chairman Abercrombie, who reportedly was none to happy with what he heard yesterday, has scheduled another Air and Land Forces Subcommittee hearing on the tanker contract for July 10th. This time around Ms. Payton and DoD acquisition chief John Young are expect to be in attendance.

HASC Bill Includes WTO Language

In what will be the first of many attempts to include tanker dispute language in this year's bills, the House Armed Services Committee (HASC) is directing the Air Force to review whether illegal government subsidies played any role in a contentious refueling tanker contract pending any adverse WTO rulings.

The Hill reports that this legislation though will most likely up in a clash with Senate that would rather not include the tanker dispute in their version of the 2009 Defense Authorization Bill. Also, the Hill reports that HASC Chairman Ike Skelton (D-Mo.) caveatted the inquiry in his mark:

Any inquiry would be done after the World Trade Organization (WTO) delivered its rulings on trade disputes between the United States and the European Union over illegal subsidies to Airbus and tax breaks for Boeing . The two bitter rivals on the world’s commercial aircraft market are also at the center of the tanker controversy.

Since the U.S. WTO case against Airbus will be ruled on first, the Air Force Secretary would have 90 days from that ruling to conduct its first review. The article goes on to state that:

If the Air Force determines the illegal subsidy had a “material impact” that calls into question the “fairness” of the contract award, the service leaders have the right to take “appropriate measures” to remove the impact of the illegal subsidy and make the process “fair to all,” according to the legislative language in the chairman’s mark.

But the provision leaves that to the discretion of the Secretary of the Air Force. It is unclear when the WTO would rule on either of the cases, but it could be several more months until that happens. The discussion could spill into the next presidency and a new Secretary of the Air Force with a different approach than the current secretary, Michael Wynne.

As our previous post indicated, the WTO ruling against the European Union could come as early as next month.

If the WTO ruling comes out against Airbus, we at Tanker War Blog expect Congress would not idly wait by while the Air Force review is conducted. Instead, we would hope funding for the tanker would be cut and not restored until the contract excludes the use of illegally subsidies Airbus planes.

Tanker Funding Fight: Wait until June?

Out today is a Reuters article about Representative Ike Skelton, the Chairman of the House Armed Services Committee, and his call to improve military readiness and the ability of U.S. troops to respond quickly to a crisis.

While he declined to weigh in on the $35 billion aerial tanker contract debate, he did make the following comments:

Skelton said there would undoubtedly be efforts to address the issue during the shaping of the 2009 defense spending bill, but his preference would be to wait until the Government Accountability Office had ruled on the protest in mid-June.

"I would hope to minimize the discussion or the effort until at least the GAO has played out its protest," he said.

Others on the committee, including Ranking Member Duncan Hunter, are on record as being against the contract. Also, many key members on the House Appropriations Subcommittee on Defense are solidly against funding the A330 based tanker.

So while many members might want to wait until the GAO rules in June, there will be significant pressure to act before then. This should make for a lively House of Representatives the next few months.